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The following is an excerpt from a 10-K SEC Filing, filed by LA TEKO RESOURCES LTD on 3/31/1998.
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True North is an advanced exploration and development project, located in the center of the Fairbanks Mining District, Alaska. The project was acquired by La Teko in 1993 and is now under joint venture with Newmont, subject to its right to terminate the venture and reconvey its 65% interest to the Company. Newmont, as operator of the project, is in the midst of a multi-million dollar development program which includes metallurgical testing and engineering work focused on the area of known gold mineralization plus exploration for new gold zones.

Location and Access

The True North project is located on the west flank of Pedro Dome, approximately 17 miles northeast of Fairbanks, Alaska. The property is accessed by a five-mile dirt and gravel road from the paved Steese Highway, which passes along the south and eastern borders of the property.
Land Status

The True North project, consisting of 86 leased Alaska state mining claims, aggregating 2,284 acres, was acquired by the Company's wholly-owned subsidiary, La Teko Resources, Inc., from AMAX Gold Exploration, Inc. ("AMAX") in 1994 in consideration of the Company's completion of $250,000 in exploration in each of 1994 and 1995. The Company was also required to pay to AMAX $500,000 in 1994 and $250,000 yearly thereafter to a cumulative total payment of $1,500,000 and to pay a 1% net smelter return ("NSR") royalty. All required payments to date have been paid.

On June 9, 1994, La Teko Resources, Inc., entered into a joint venture agreement (the "JV Agreement") with Newmont, whereby Newmont acquired a 65% interest in True North. In order to earn that interest, Newmont paid La Teko $6 million and must complete $21 million in exploration and development work on True North (approximately $10.5 million spent as of December 31, 1997) and complete a feasibility study. The Company will receive no further cash payments from Newmont under the JV Agreement. The feasibility study was to have been completed by December 31, 1996. However, Newmont has elected to extend the date for completion. The JV Agreement allows this extension for up to six months beyond the time when Newmont ceases an active exploration program. During such extension, certain of Newmont's exploration costs are not credited against its $21 million funding commitment. After Newmont has earned its 65% interest in True North, La Teko and Newmont will each fund project development costs on a pro rata basis, with Newmont as operator. If either partner fails to contribute its share, its interest in the property will suffer corresponding dilution. Newmont can terminate the JV Agreement by reconveying its 65% interest in the property to the Company, which would then be under no obligation to reimburse Newmont for any payments or expenditures to date. Newmont and La Teko may each choose to sell their interest in the JV Agreement, and the other participant has a preemptive right for 60 days from the date of receiving a notice stating the price and terms to elect to acquire the offered interest. If the preemptive right is not exercised the offering participant has 120 days to consummate the transfer to a third party at a price and terms no less favorable than in the notice. Although Newmont has advised the Company that Newmont proposes further exploration of the True North property during 1998, Newmont's further actions respecting the True North project are beyond the ability of the Company to either control or predict. There can be no assurance that the results of further exploration, development or feasibility analysis will warrant placing the True North property into production by either the Company or Newmont. The terms and conditions of the joint venture with Newmont are more fully discussed in the Company's annual report on Form 10-K for the year ended December 31, 1995.

Since acquiring the project, Newmont has added further claims by staking, purchase and options from third parties, bringing the total project acreage in early 1998 to 14,300 acres. The Company has paid its 35% share of acquisition costs so that these mineral properties have become part of the joint venture as per the terms of the JV Agreement.

Exploration History

Placer gold was first discovered in a creek draining the south side of Pedro Dome in 1902 by Felix Pedro. Placer mining on Dome and Eldorado Creeks, immediately adjacent to the True North property, began about eight years later. During the period 1912 to 1914, the Soo Mine reportedly produced between 4,000 and 5,000 ounces of lode gold from a quartz vein in the southern portion of the True North property. Several other small lode occurrences were prospected in the vicinity.

In 1916, 200 tons of stibnite ore (antimony) was reportedly produced from the Hindenburg Mine, within the area of the presently defined Hindenburg gold deposit. A further shipment of 16 tons grading 38% antimony was reportedly made in 1942. Another prospect, the Mother Lode, adjacent to the presently defined Shepard deposit, had exploration shafts to 147 and 215 feet.

AMAX first acquired an interest in the property covering the Hindenburg Mine in 1990. The property position was expanded as AMAX completed the first drill program on the property, 4,000 feet, in 1991. The table below outlines subsequent exploration on the property, including that conducted since the Company acquired it in 1993.

               1992     1993    1994     1995     1996      1997     Total
               ------   -----   ------   ------   ------    ------  -------

RVC Drilling    5,332   3,450   51,810   14,885   40,428    57,753  173,658
Drilling           --      --    2,042   13,049   24,798     2,491   42,380

Geology and Mineralization

The True North property lies within a broad belt of metamorphic rocks trending through central Alaska and Yukon known as the Yukon Tanana Terrane. Numerous gold occurrences are found within these rocks, including the famous Klondike gold camp in the Yukon and the Fairbanks Mining District of Alaska. Lode gold occurrences typically occur where the older metamorphic rocks have been intruded by granitic igneous rocks which were emplaced approximately 90 million years ago.

Several types of gold mineralization have been exploited. The early miners sought the placer gold in streams and rivers draining the bedrock gold source areas and this mining activity continues today. Initial lode mining concentrated on quartz veins containing high grade gold values. More recently, however, large, low-grade gold deposits have been sought. The best example of this is the Fort Knox deposit, seven miles east of True North, which was placed into production by Cyprus-AMAX in December, 1996, at a mining rate of approximately 350,000 ounces gold per year.

Gold mineralization on the True North property is hosted by metamorphic rock of the Chatanika Terrane, including quartz-mica schist, quartzite, eclogite, amphibolite, marble, and argillite. Some units are graphitic. Gold occurs in nearly flat-lying shear zones and along faulted contacts. These zones are typically 30 to 50 feet thick, are stacked one on top of the other, and can be correlated across the property. The three originally defined zones, Hindenburg, Central, and Shepard, now all appear to be part of a single zone with a continuous strike length of roughly 5,000 feet. Average grades are 0.07 to 0.09 ounces gold per ton (2.4 to 3.1 grams gold per tonne), although higher grades in excess of 1 ounces gold per ton occur locally.

A more recently defined zone, the Zeppelin, occurs just north of the Central zone, and is higher grade, averaging approximately 0.12 ounces gold per ton (4.1 grams gold per tonne).

Three other zones of significance have been discovered, the Murray Zone discovered in 1996, and the Merlyn Zone and Dome Creek Zones, discovered in 1997. Each of these zones require additional drilling to be fully evaluated.

Within the first 150 to 200 feet of surface, the gold mineralization is predominantly oxidized. Below this depth there is a gradual transition to sulfide mineralization. The depth of oxidation is typically greater at higher elevations and less in the valleys, and generally reflects depth to the top of the water table. As the Murray, Merlyn and Dome Creek zones are in valleys, the depth of oxidation is less than for the zones where the resources described below occur.


On June 5th, 1997 the Company announced a mineral inventory calculation done by Newmont utilizing all drill data to the end of 1996 of 18,208,000 tons at an average grade of 0.072 ounces gold per ton (2.5 grams per tonne), for a total contained 1,313,899 ounces of gold. Of this total 1,011,819 ounces have been classified as oxide. Oxide is defined by Newmont as mineralization with a ratio of cyanide extractable gold to fire assay gold of 0.6 or greater. This calculation was done using a $400 per ounce of gold cone in the calculations. The Company engaged an independent consultant who confirmed the Newmont calculation through an independent review of all drill data.

Subsequent to year end 1997 Newmont completed a calculation utilizing a $350 per ounce of gold cone and included further data to upgrade a portion of the resource to "Mineralized Material Not in Reserve", which Newmont included in its announced mineralized resources. The updated calculation is 10,215,000 million tons grading 0.078 ounces gold per ton (2.7 grams per tonne), a total of 796,770 ounces of gold, all of which is classified as oxide.


Preliminary metallurgical bottle roll testing has demonstrated gold recoveries from in the order of 90% for oxidized mineralization. As the degree of oxidation decreases, gold recoveries by leaching also decrease. Bench scale flotation tests of sulfide mineralization indicate gold recoveries of 82 to 96% in the sulfide concentrate.

Large diameter core samples and surface bulk samples were collected in the fall of 1997 for detailed metallurgical work. The core will be examined mineralogically followed by smaller diameter (eight inch) column leach testing while the two 25 ton bulk samples will also undergo large diameter (two foot) column leach tests. This work is currently in progress.

Proposed Program

The Company has been advised by Newmont that it has budgeted a total of $3.6 million for 1998 including $1.5 million for the property payments due during the year, further land acquisitions and a continued exploration program directed towards power auger sampling on areas outside the current resources area for January through June 1998. A further $2.1 million is budgeted for prefeasibility metallurgical studies described above. Subject to satisfactory test results and favorable market conditions, the metallurgical testing will lay the foundation for scoping and engineering studies scheduled for the second half of 1998. This work will encompass siting studies, geotechnical work, engineering design and detailed cost estimates. There will also be in-fill drilling for reserve definition purposes.


The Ryan Lode property has a long history of gold exploration and mining, dating back to the turn of the century. During the period from 1987 to 1989, La Teko successfully produced 19,220 ounces of gold from 329,000 tons of ore mined by open pit and extracted by heap leach methods. The Company has subsequently made a substantial investment in the property, both in the reclamation of the previous mining activity and in exploration for more minable reserves.


The Ryan Lode property is located on the southeast flank of Ester Dome, approximately eight miles west of Fairbanks, Alaska. The Parks Highway, connecting Fairbanks to Anchorage, traverses the southern boundary of the property. The property can be accessed by Gold Hill Road and then Henderson Road, for a total distance of 2.4 miles north from the highway. Power supply also runs very close to the property.

Land Status

The core Ryan Lode claims, consisting of 10 claims, 14 unpatented claims, and one unpatented placer claim totaling 700 acres, are subject to a lease agreement which calls for a 5% net smelter royalty on production from these claims. Annual advance royalty payments are being made, currently amounting to $150,000 per year, escalating to $200,000 per year in 2013, to $250,000 per year in 2018, to $300,000 per year in 2023, and $300,000 per year from 2028 to 2032. The lease agreement may be extended annually thereafter. A 3% net smelter return royalty is payable on the surrounding Bar and St. Patrick claims comprising a total of 289 acres.

A prior lease agreement with LAC Minerals, U.S.A., requires payment of $5 million on the basis of 5% of net profits after recovery of pre-production costs, 10% of net profits after recovery of two times pre-production costs, and 20% of net profits after recovery of three times pre-production costs until the $5 million is paid. Pre-production costs are restricted to a maximum of $1 million.

The Company has expanded its Ryan Lode properties so that it now holds 234 additional acres adjacent to the Ryan Lode claim group. These claims are generally subject to 3% to 4% net smelter return royalties based on mineral product mined and removed from the properties.

Exploration and Development History

Extensive placer mining has taken place in the vicinity of Ester Dome since the turn of the century. The first lode gold interest was during the period 1912 to 1916, when several prospect pits and two shafts were sunk. In 1916, Kennecott Copper Corporation acquired the property, sank a 500-foot shaft and carried out significant development activity. Others continued with sporadic activity and, by 1930, reserves were estimated at 1.3 million tons grading 0.158 ounces gold per ton.

In 1938, the property was acquired by Bartholomae Oil Corporation which continued with more exploration and development, culminating in the production of 620 ounces gold from 1,430 tons of ore. All operations ceased during World War II. Minor exploration was carried out from 1954 to 1958 and again from 1969 to 1970.

During the period 1974 to 1978, Fourbear Enterprises, Inc., constructed a 400 tpd flotation mill, which encountered gold recovery problems, and operations ceased. St. Joe American Corporation then acquired the lease and carried out further surface and underground exploration. In 1985, the property was acquired by Citigold Mining Company, Ltd., which carried out a 10,000 ton test heap leach before 1986, when it was acquired by La Teko. In the following three years, La Teko mined and leached 329,000 tons of ore at an estimated grade of 0.09 ounces gold per ton, to recover 19,220 ounces of gold. Production ceased in 1990.

From 1990 to the present, La Teko has carried out substantial exploration on the property, including 220,236 feet of drilling in 752 drill holes. The Company has also continued a program of baseline environmental monitoring and reclamation of previous mining activity.

In 1997, La Teko continued the reclamation work on the A-B-C-D heap leach pads, where gold production occurred in the late 1980's, as well as the exploration trenches. Ryan Lode Mines, Inc., a wholly owned subsidiary of the Company and operator of the Ryan Lode project, was awarded the 1997 Reclamation Award from the Alaska Department of Natural Resources for this reclamation work.

Also in 1997 Silverado completed 8,855 feet of drilling in 38 drill holes prior to signing the agreement described below.

Geology and Mineralization

The principal rock unit in the Ryan Lode area is the Cleary Sequence member of the Fairbanks Schist, consisting of varied rock types, including metamorphosed volcanic rocks, along with marble, calcareous quartz-mica schist and carbonaceous units. Granite intrusions in the area are principally concentrated near and within the Curlew deposit, south of the main Ryan Shear.

The gold in both the Ryan and Curlew ore bodies occurs in mineralized quartz veins, breccias, and gouge zones within broad shear zones. The gold occurs with sulfide minerals pyrite, arsenopyrite, and locally stibnite. Higher grade gold mineralization typically occurs next to the hanging wall of the shear, with lower grade mineralization below this.

The main shear zone, which reaches 150 feet in thickness in places, has been traced by drilling for over a mile and is contained in metasedimentary and metavolcanic rocks of the Cleary Sequence. The Curlew Shear, which may be an offset, southern continuation of the Ryan Shear, ranges up to 180 feet in thickness. Other subparallel shears also occur on the property, and although these are currently poorly defined, they could add to the future gold resource base.

Mineralization is typically oxidized to depths of 200 to 300 feet, with an enriched or supergene zone for 50 to 100 feet below this. The oxidized and supergene zones demonstrate good gold recoveries by leaching, while rates of gold recovery by leaching decreases at increasing depths below the enriched zone.


In 1994, an independent professional engineering firm engaged by the Company calculated proven and probable reserves for Ryan and the adjacent Curlew Shear to be 14.5 million tons grading 0.056 ounces gold per ton (1.9 grams gold per tonne), with a 0.015 ounces gold per ton (0.5 grams gold per tonne) cut-off and a stripping ratio of 3.8:1. This is a reserve of 822,200 contained ounces gold within a geological resource of 2.4 million ounces gold. A subsequent "high grade" pit calculation showed a reserve of 4.6 million tons grading 0.09 ounces gold per ton (3.1 grams gold per tonne) with a strip ratio of 7.5:1 and an underground reserve of 1.46 million tons grading 0.215 ounces gold per ton (7.4 grams gold per tonne) . The "high grade" pit includes only oxide and supergene mineralization, and is thus totally amenable to heap leach gold recovery.


The ore at Ryan Lode requires crushing and agglomeration prior to leaching. Column leach tests show that gold recoveries in the range of 70% to 80% can be expected. A gravity circuit has been shown to recover 45% to 50% of the gold. Gravity separation of gold in combination with leaching would be expected to provide faster and superior gold recovery to leaching alone.

Sale to Silverado Gold Mines Ltd.

The Company agreed in 1997 to sell its 100% interest of the Ryan Lode property to Silverado. Subsequent to year end on March 26, 1998 the Company was given notice by Silverado that it elected to terminate the sale agreement.

Proposed Program

The Company will evaluate the ongoing development of the Ryan Lode property independently. It will also contact other potential parties which may be interested in purchasing or joint venturing the Ryan Lode. The Company will continue the reclamation requirements while the development and sale options are evaluated.


In February 1995, the Company located 104 state of Alaska prospecting sites called the Juniper property on approximately 16,131 acres located 30 miles northeast of Fairbanks, Alaska. This property covers rocks of the Chatanika Terrane, the same as those hosting the True North deposit 15 miles to the southwest. In addition, the property lies along the same, northeast-trending structural linear which intersects both the True North and Ryan Lode gold deposits. There is little evidence of historical prospecting in the area, largely because of the thick cover of wind-blown silt and clay which masks the underlying geology and would effectively hide any bedrock mineralization. However, minor placer gold mining activity is evident in a number of streams which drain the area.

In April 1996, the Company executed a five-year agreement with the University of Alaska to explore its 12,640-acre Twin Buttes property. Subsequently, the Company paid $30,000 for an exclusive development and mining lease. During 1997 the Company made its first annual option payment of $45,000. The property is located 28 miles northeast of Fairbanks, Alaska, adjoining the south side of the Company's Juniper property. The property is underlain by the same rocks as the Juniper property and has similar potential to host gold mineralization.

During 1995, the Company carried out initial exploration efforts on the Juniper property, including geochemical sampling, the results of which suggested that further exploration is warranted. In 1996 the Company expanded its effort to include the Twin Buttes property and did additional geologic mapping and soil sampling. The Juniper prospecting sites were converted into 405 state claims. The gold anomalies detected were weak, possibly because of the extensive overburden cover which could mask the expression of buried mineralization.

In 1997, a further program of prospecting, geological mapping and geochemical sampling was conducted over both properties and a part of the claims were flown with a low level, helicopter-borne magnetic and electromagnetic survey. The magnetic survey highlighted patterns of structural deformation and zones of low magnetic intensity on the Twin Buttes lease that are similar to those observed over the True North and Fort Knox gold deposits. The Company acquired an additional 22 prospecting sites totaling 3,360 acres to cover extensions of the identified anomalies beyond the Twin Buttes lease.

The Company's plans for the 1998 summer exploration season are not yet finalized.


On May 24, 1996, the Company, through its wholly-owned subsidiary, Ryan Lode Mines, Inc., entered into a letter agreement with Mrs. Helen Warner for an option on approximately 5,000 acres known as Discovery Gulch (the Discovery, Deadwood and Tom group of claims) in the Circle Mining District near the small town of Central, Alaska. The property is on Deadwood Creek, approximately 125 miles northeast of Fairbanks.

The Company paid $15,000 for an exploration lease. La Teko made the annual payment of $10,000 in 1997 and a further $10,000 is required upon the 1998 anniversary date. Subsequent annual payments, beginning with the third anniversary date, will be $35,000. The property is subject to a 2% net smelter return royalty payment. The Company will have a vested interest in the property upon a $300,000 cash payment to be made to Warner at the Company's option within one year after completion of a positive feasibility study. The minimum exploration requirement for 1997 of $30,000 was completed; the 1998 requirement is $35,000. During the fourth exploration season, the minimum exploration requirement increases to $100,000 with an additional $50,000 increase annually thereafter.

The Company completed a $25,000 exploration program during 1996. This effort included geological mapping, soil sampling, and trenching. A number of samples returned anomalous gold values that confirm results of previous exploration by others. The anomalies appear to be associated with a granitic intrusion that occurs on the property. Placer gold production from the surrounding creeks is further indication that this is an area with lode gold potential.

In 1997, a reconnaissance ridge top soil sampling program was conducted throughout the Discovery Gulch claim blocks to detect anomalous gold areas. Five consecutive samples, spaced 200 feet apart, returned anomalous gold and arsenic values. Subsequently, a 100 foot spaced grid oriented along the north- northwest ridge top was sampled to better define the anomaly. The grid is approximately 1000 feet long by 500 feet wide. The results continue to be encouraging, with 44 of the 78 samples returning better than 100 parts per billion (ppb) gold and elevated arsenic values. Only nine samples had gold values below the detection limit. The anomaly remains open, particularly west and east at lower elevations where the original reconnaissance soil program did not extend. Three small granodiorite outcrops were mapped within the area of the soil grid. The balance of the area is covered by overburden.

In addition to the above target, the reconnaissance program returned several other high, but isolated, gold values. For example one soil sample on the Discovery claim block contained 2620 ppb Au, supported by a re-analysis of 3000 ppb Au.

In 1998 La Teko expects to do additional soil sampling to further delineate the extent of the gold-in-soil anomaly followed by trenching to test for the source of the gold anomaly.



The climate in the Fairbanks area is variable. The record temperatures are a low of -54 degrees Celsius (-66F) and a high of 37 degrees Celsius (99F). The mean annual temperature is -3 degrees Celsius (26.5F). The average temperature for the months of April through September is 10 degrees Celsius (50.1F), the average temperature for the months of October through March is -16 degrees Celsius (2.75F). The temperature rises above 22 degrees Celsius (70F) approximately 51 days per year and drops below freezing 225 days per year. The rivers in the region begin to freeze in October and thaw in May. Average annual precipitation in Fairbanks is approximately 12 inches, which includes an average snowfall of 69.3 inches. Mining operations can be conducted in the region throughout most of the year, although exploration is restricted during the winter.


There are extensive federal and state laws designed to conserve and prevent the degradation of the environment. These laws and regulations require obtaining various permits before undertaking certain exploration and development activities and may result in significant delays, substantial costs, and the alteration of proposed operating plans. These requirements also necessitate significant capital outlays and may result in liability to the owner of the property for damages that may result from specific operations, all of which may materially and adversely affect the business of the Company and the financial results of its operations.

The Company believes that it is in material compliance with applicable environmental regulations.

Ryan Lode

The Ryan Lode property is located eight miles west of Fairbanks, Alaska, and 0.5 miles from rural homes. The Company initiated baseline environmental monitoring for the project in 1993, including air quality, surface water quality, ground water quality, geohydrology, biological inventory, and acid base accounting. These activities will support environmental permitting activities which will commence with the development of an operating plan.

The Company expects that obtaining required permits for proposed activities on the Ryan Lode property may be adversely affected because of its location eight miles from the city of Fairbanks and approximately one-half mile from rural homes, which exposes the Company's proposed activities to greater public interest and scrutiny and increases the potential adverse impacts on humans resulting from the use, storage, or discharge of hazardous materials. If production is to occur directly on the property the Company expects that it may be required to complete an environmental impact statement and be involved in a protracted process with applicable permitting agencies and the public in obtaining required permits. There can be no assurances respecting the time involved to obtain required permits, restrictions on operations that may be imposed as a condition to obtaining such permits, or when production could commence. Further, there can be no assurance that the Company will not have to alter its plans in response to government review or public comment, which could adversely affect the financial return to the Company from its proposed activities. La Teko will be required to demonstrate substantial financial responsibility through bonding, deposits, or other means acceptable to governing agencies before resuming operations at Ryan Lode.

True North

The True North property is located in a relatively uninhabited area and therefore presents lesser concerns about factors such as light, noise, dust, and visibility considerations in receiving permits. The Cyprus/Amax Gold, Inc., Fort Knox property, located in close proximity to True North has been issued permits to commence production without the necessity of providing a full environmental impact statement. Production facilities have been completed and the project poured its first gold in December 1996. Newmont, as the operator of the True North project, will have the responsibility of permitting the True North project. There can be no assurance that Newmont will continue with development of the True North project or that it will be able to obtain permits without substantial delays and/or extensive expense.

Other Regulation

The mining and exploration operations of La Teko are also subject to both federal and state laws and regulations pertaining to employee health and safety.


The State of Alaska levies a mining license tax based on net income reported to the federal government and royalties from Alaska mining property at the following rates: there is no tax on taxable income under $40,000; however, if taxable income exceeds $40,000 and is less than $50,000, the tax is 3% of the total taxable income; $50,001 to $100,000 - $1,500 plus 5% of excess over $50,000; $100,001 or over - $4,000 plus 7% of excess over $100,000. The State of Alaska also charges a production royalty of 3% of net income on state mining claims. An annual rental fee must be paid to the State of Alaska for each state claim or fraction thereof. The rent is $20 per claim for the first five years held; $40 per claim for the second five year held; and $100 per year per claim thereafter. Claims staked before 1989 are considered to be staked in 1989 for the purpose of this law.


The Company has entered into an agreement dated 24 November, 1997 and amended 2 February, 1998 with Kennecott Canada Exploration Inc.(" Kennecott") to acquire 100% of the Scheelite Dome gold property in the Mayo mining district, Yukon Territory, Canada.

The Company must make Canadian $135,000 ("C") in payments to the underlying property owner and carry out C$800,000 worth of exploration expenditures as follows:

a) Pay C$70,000 and conduct C$150,000 of exploration in 1998;
b) Pay C$65,000 and conduct C$200,000 of exploration in 1999;
c) Conduct C$200,000 of exploration in 2000; and
d) Conduct C$250,000 of exploration in 2001.

Should the Company exercise its option and deliver a feasibility study to Kennecott, Kennecott shall have 60 days in which to elect to reacquire a 49% interest in the project by paying 150% of 49% of the expenditures incurred by the Company, or receive a 2% net smelter return royalty on production from the property.

The project consists of 587 contiguous claims, totalling 28,700 acres. It is road accessible and located 16 miles northwest of Mayo, Yukon Territory.

Precious metals were first discovered on the property in 1916 and exploration for both gold and tungsten continued intermittently through to 1990. In 1991, H6000 Holdings Ltd. acquired the property and explored the property for Fort Knox (Alaska) type deposits with disappointing results. Kennecott acquired the ground in 1994 as part of a regional exploration program and carried out geological mapping, geochemistry surveys, excavator trenching and, in 1995, drilled eight diamond drill holes. Results of the work identified numerous structurally controlled mineralized zones adjacent to the area explored by H6000 within an east-west oriented 0.9 miles by 2.2 miles (1.4 kilometers by 3.5 kilometers) area defined by >40 parts per billion (ppb) gold-in-soil anomaly.

Work by Kennecott in 1997 included the construction of 5.6 miles (9 kilometers) of drill access road, 8 excavator trenches totaling 1.0 linear miles (1.6 kilometers) and the drilling of 13 reverse circulation drill holes totaling 3,451 feet (1,052 meters) within the 40 ppb gold-in-soil anomaly contour. Results returned significant gold values. Continuous chip samples from one trench returned and uncut average grade of 330 ppb gold over 0.5 miles (0.33 grams gold per tonne over 0.74 kilometer). A second trench returned an uncut average grade of 290 ppb gold over 0.2 miles (0.29 grams gold per tonne over 0.376 kilometers). The highest individual trench assay was 0.60 ounces gold per ton over 14.8 feet (20.60 grams gold per tonne over 4.5 meters). All the drill holes were mineralized, and individual holes ranged from 20 ppb gold over 82 feet ( 0.02 grams gold per tonne over 25 meters) to 480 ppb gold over 95 feet (0.48 grams gold per tonne over 29 meters) and 240 ppb gold over 353 feet (0.24 grams gold per tonne over 107 meters). The highest value encountered was 4,880 ppb gold over 5 feet (4.88 grams gold per tonne over 1.5 meters).

Work to date has located a number of structurally controlled targets within the gold-in-soil geochemistry anomalies on the property that require trenching and drilling to determine if economic concentrations of gold exist. In 1998 the Company plans to carry out structural mapping and geophysical surveys to further define structural controls of the gold mineralization where the gold may have been localized into higher grade areas in the mineralizing system. Subject to the program results and the Company's resources, a drill program will be focused on testing various targets within the mineralized system.


The Margarita property consists of 36 unpatented federal lode mining claims totaling approximately 700 acres. The property is located approximately 75 miles south of Tucson, Arizona, in the Oro Blanco Mining District, approximately three miles from the Mexican border. The property can be reached by traveling 20 miles east from Arivaca on a graded county road The Company's purchase agreement calls for a 3% net smelter return royalty. In addition, prior lessees will receive a 10% net profit interest on the first 20,000 ounces of Gold production and 15% thereafter.

During January 1997, the Company executed a letter agreement with Oro Blanco Resources Corp. ("Oro Blanco") whereby Oro Blanco has an exclusive, three-year option to explore the Margarita property. During this period, Oro Blanco must complete $500,000 in exploration and issue 125,000 shares of common stock to La Teko, according to the following schedule.

            Common Stock to       Exploration
                La Teko           Expenditures
            ---------------       ------------

Year 1       25,000 shares          $100,000
Year 2       50,000 shares
Year 3       50,000 shares

At the end of the option period, Oro Blanco can acquire a 100% interest in the Margarita property by paying the Company $100,000 in cash. The Company retains a 1% net smelter return production royalty. Minimum annual royalties are payable $50,000 on the fourth anniversary date, $75,000 on the fifth anniversary date, and $100,000 on the sixth and subsequent anniversaries. Advance minimum royalties will be applied against net smelter royalties during the life of the mine. The final agreement has not been concluded and there are no assurances that Oro Blanco will complete the agreement nor complete the terms of the agreement.


On July 19, 1994, La Teko entered into an agreement with International Freegold Mineral Development, Inc. ("Freegold"), respecting the acquisition of its stock. Pursuant to the agreement, La Teko acquired 750,000 shares of Freegold common stock for $231,069 in July 1994 and a further 750,000 shares for $269,844 in July 1996, for a total of 1.5 million shares for $500,913.

La Teko continues to own 1.5 million shares of Freegold constituting approximately 8% of the issued and outstanding stock of Freegold, which had a current market value as of December 31,1997, of $325,000, based on the closing sales price for such stock as of such date on the Vancouver Stock Exchange, converted to U.S. dollars. Because of the nature of the limited trading market for Freegold stock, there can be no assurance that the Company would be able to liquidate its position readily or without a loss if it should desire to do so.

Under the terms of the agreement to sell the Ryan Lode property La Teko received 1 million shares of Silverado constituting approximately 1% of the issued and outstanding stock of Silverado, which had a current market value as of December 31, 1997 of $250,000 based on the closing sales price on Nasdaq. There can be no assurance that the Company would be able to liquidate its position readily or without a loss if it should desire to do so.


The Ryan Lode and the Margarita claim groups include Federal unpatented mining claims. The Ryan Lode and True North groups include Alaska unpatented mining claims. Such claims are subject to inherent uncertainties. Unpatented mining claims, when properly located, staked, and posted according to regulation, give the claimant possessory rights only. Possessory title to an unpatented mining claim, when validly initiated, endures unless lost through abandonment due to failure to perform and file proof of annual assessment work or through a forfeiture which results from an adverse location made while the prior location is in default with respect to the performance of annual assessment work. Because many of these factors involve findings of fact, title validity cannot be determined solely from an examination of the public record. The continuing validity of these claims is subject to many contingencies, including the availability of land for location at the time the location was made, compliance with federal and state regulations for locating claims, the performance of annual assessment work, the payment of annual rental fees and the making of required annual filings with the Bureau of Land Management and the appropriate state authority in which the claims are located. Failure to pay required annual rentals constitutes a statutory abandonment of the mining claim or site. Similar conditions apply to the mining claims which constitute the Scheelite Dome property in the Yukon Territory, Canada.

The Company believes that it has valid possessory title to all of the unpatented federal and state mining claims described herein.